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Thursday, October 29, 2009

My life in real estate: who represents whom?

Do you remember the first home you purchased? I do; what an impulse buy. Having been a renter for 3 years, I was tired of mercurial landlords and wanted to have some say on my how my home looked. There seemed to be such frenzy in 1977, as the lower interest rates (~ 8%/30 yr fixed) took hold – many of my friends were out buying condos. (This was before the rates jumped to a whopping 17% in 1981.)

In those days before personal computers and Internet access, I blithely went off to look at condos at a Sunday open house. With little research, investigating or understanding, I leapt at the chance to purchase something I had seen: a condominium on Scott Street in Chicago. The owners had ghastly taste with bright orange and purple walls, but there was charm in the vintage building and I found some of the features of the apartment pretty lovely.

When I think back to that first apartment, I’m sort of amazed I lived there for so many years. It had one bedroom, one bathroom, a living room and a closet-sized kitchen (it actually was a closet, before the building converted to apartments). With electric heating – less you forget January ’77,’78, and ’79 are among the three coldest months in Chicago history – my electricity bills were outrageous. (That was the second real estate lesson I learned – never buy a property with electric heating.)

I paid way too much money for the unit… which brings me to my 1st lesson in real estate.

Who was representing whom?
Or why did my agent encourage me to pay full price for the condo?

Prior to 1995, all real estate agents in Illinois represented the seller. They either represented the seller directly as the “listing agent” or they represented the seller as a sub-agent by bringing in the buyer and acting as the “selling agent.” It takes very little to see that the buyer was left out in the cold.

Unfortunately, very few agents bothered to explain how the system worked to buyers. I naively thought that my agent was representing me, as she was encouraging me to increase the amount I was paying for the apartment. WRONG. Not only was she NOT representing me, it turned out that she was also the listing agent for the seller, so she would eventually be earning both the listing and selling sides of the commission. In retrospect, I also felt she was not only working for the sellers she was very much working for herself.

I never wanted to work with that agent again, after I figured everything out. I felt totally burned by the experience. I see that agent’s name from time to time in the newspaper. Like many long time agents, she saw no conflict of interest in representing both buyers and sellers simultaneously. Even today many agents feel totally OK with what is now called dual agency.

Personally, I don’t like dual agency. It’s sort of like taking two dates to the prom. It just doesn’t make sense to me. Lawyers can’t represent both the plaintiff and the defendant, so how can a realtor effectively represent both buyers and sellers? But the practice is quite legal and many agents feel very comfortable serving as dual agents.

In 1995, Illinois law changed. My guess is that a sufficient number of buyers must have complained that the system was stacked against them and the state changed the licensing law. Today’s law requires that dual agency must be disclosed and approved in writing by both the buyers and sellers before an agent can serve as a dual agent on the purchase of a property.

The law also states that buyers have equal representation and need to sign an exclusive buyer agreement, much in the same way that sellers need to sign a listing agreement.

When beginning a relationship with a real estate agent, it’s important to establish “agency.” When you go to an open house, determine whether the agent at the home is the listing agent of the property. If yes, then pretty much assume that they are going to be working for the seller. If you’re interested in buying the home, then I would recommend that you be fairly confidential with what information you disclose to that agent.

If you’re already working with a buyers’ agent, let the listing agent know right away.

If you are neither working with an agent nor interested in the home, then try to learn something about the listing agent – is this someone you might want to work with in finding or selling a home? Are they helpful and knowledgeable about the area? Take the time to interview the agent – you may want to hire them.

Sellers need to understand that every other Illinois agent might bring in the buyer to purchase their property. They need to be thoughtful about what information they share with friends, neighbors and other Realtors. They should ask themselves, "Would I be comfortable with that information being passed along to a potential buyer?"

For complete information about Illinois agency law, the Illinois Association of Realtors has a great website that can provide a detailed explanation. I encourage anyone interested in buying or selling a new home, to read this over and be familiar with agency.

Now, to finish my story... I lived on Scott Street for 9 years. Because of my initial real estate experience, I had such an utter distrust of real estate agents that I never bothered to call one when I sold my apartment to a neighbor. To this day, I have no idea whether I priced the place correctly. Again naively, I sold it to break even. Which leads me to my third lesson in real estate: FSBO…. To be continued later.

Saturday, October 24, 2009

The emotion of color

I can’t remember where I read it, but I remember reading that yellow houses sell faster than blue houses. I have certainly found that to be the case in my realtor experiences. A blue house seems to be a really tough sell. It’s ironic. Blue is ranked as one of the favorite colors of both men and women.

When I Googled the psychology of color, the search returned over 9,000,000 entries: everything from how to paint the exterior of your house to setting up retailing space that will attract buyers. Color does invoke feelings. For example, one writer indicated:

• Red is the color of energy and immediately draws the eye to the direction where it’s placed. To me that would suggest that it works well for accent pillows or for a front door. I read somewhere that a dining room that is painted red is great for entertaining and conversation.
• Blue is a calming color and helps us to relax.
• Yellow is the color of the sun and can often make people feel happy if used in the right shades
• Brown is the color of stability and friendship. It symbolizes the earthy feelings, making people feel relaxed. Sounds like a good color for a family room.

We all have favorite colors and should paint our homes exactly the way we want. BUT, how you live in a house is quite different from how you sell a house. Not everyone has the same favorites and the more dramatic the colors, the less likely that potential buyers may feel comfortable in that home... after all, they are bringing their furnishings with them and their things may not work in a home of dramatic colors. How will that red bedspread look in a grape juice purple room?

I’ve had many sellers say, “Well the buyer can paint the rooms any color they want.” That's true; the buyer can do that. But buying a house is big outlay of capital, and some people don’t want to continue spending a lot of money after they’ve just bought a new house. It’s a lot easier for a buyer, when the house they are purchasing is a blank slate (e.g., beige, soft toned colors, soft whites) rather than rooms with distinctive colors. To make the house more marketable, I recommend that sellers try to create that “blank slate” that will appeal to the majority of potential buyers. Yes, it requires that sellers spend some upfront money, but a house that requires little modification will more than likely sell for more than one that needs to have the colors toned down.

But don't create too much of a blank slate. Painting everything white is not a great idea. Using colored, rather than bland, white walls is far better. One study showed that a room painted white appeared smaller when compared to an identical room painted in a soft color! Most people also look better when surrounded by color, and feel happier – as long as the colors aren’t too bold or unusual.

Mauve is a color that I can’t stand -- don’t ask me why, because I don’t know why. I am repelled by it in the same way that Marnie, from that classic Hitchcock movie, was repelled by the color red. Color is such a visceral and emotional thing to people – we all love different colors. When I was looking for my house, I found a home in Lake Bluff that I really liked…but it had wall-to-wall mauve carpeting. I wanted hardwood floors but would have settled for a neutral colored carpet. For me, that mauve carpeting was a deal breaker. I hated removing a perfectly good floor covering and wasn’t up to installing hardwood floors. But I just couldn’t live with that carpeting -- it would have clashed with all my earth toned furniture.

So I guess that means, that when I sell my house, that tomato red dining room is probably going to have to go!

Sunday, October 4, 2009

I think that I shall never see....

Remember that Joyce Kilmer poem we had to learn in school?

I think that I shall never see
A poem as lovely as a tree...

I'm reminded of it as the leaves start changing colors and the trees begin shedding their bountiful foliage everywhere. One of the challenges (and perks) of being a homeowner on the North Shore is dealing with our beautiful, mature and majestic trees.

When I was young, I remember how dramatic the view was down Kenilworth Avenue as we would walk to the beach. The magnificent towering elm trees formed a cathedral-like canopy all the way to the lake. Then we eventually heard the constant buzz of chainsaws destroying the scene. Dutch elm disease had taken hold and the avenue was never the same again.

Few people consider trees as part of the purchase price of their new house. They examine the furnace and the fixtures and the roof and the appliances, but rarely look closely at their new trees.

Having planted some trees and having lost some branches here and there, I have a few thoughts to share about trees:

  • A word to buyers, investigate ALL of the trees on the property. During the summer months, any problems tend to be more obvious, while it’s a little harder to determine the health of deciduous trees in the winter. During the inspection phase, consider hiring an aborist to examine the trees and to verify their viability. You’re not only buying the house, you’re buying all the plants and vegetation that come with the house. Removing a diseased tree is a huge expense and it’s good to know up-front whether there is an ailing tree on the property.
  • Whether buying or selling a house, make sure the gutters are completely cleared of leaves. During the winter, an ice damn can form and create a blockage so that when it melts there is a real problem. Water can seep into the interior of the house causing damage to walls and insulation.
  • Consider how close the trees are planted near the buildings. Root systems can cause havoc to the foundation of a house.
  • Analyze the species that are on your property. While mighty, oak trees drop acorns all over the place (which can stain or leave dents in the roofs of cars); when the cottonwood pods split open, the cottony masses are easily airborne and their mess is everywhere; willows absorb lots of water -- check out the drainage issues of the house; maples with their shallow root systems can steal the water from near-by perennials; or that dreaded buckthorn – while it provides great screening --is terribly invasive and can kill other trees. A knowledgeable arborist can teach you about both the health and the issues surrounding each of the trees on the property.
We are so lucky in this area. Not only do we have the Chicago Botanic Garden and University of Illinois Extension plant information resources, but not far from us in Lisle is the spectacular and renowned facility, The Morton Arboretum. It's a great place for getting any questions answered and actually seeing various trees in a natural setting.

Finally, if you're thinking about planting new trees -- know your soil and identify which trees with thrive in the spot where you plan to dig. Also, nature provides lots of diversity of species and it's instructive for us to keep that in mind when planting trees. I believe that planting a tree is a gift to yourself, your family, your community and to future generations. Plant thoughtfully and enjoy our beautiful fall season!